HYRECAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Stock-based compensation is included in the consolidated statements of operations as follows:

Loss per Common Share

The Company presents basic loss per share (“EPS”) and diluted EPS on the face of the consolidated statements of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. For periods in which we incur a net loss, the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted EPS calculations. For the ninethree months ended September 30, 2021March 31, 2022 and 20202021, there were 691,255680,255 and 1,179,464251,846 options and warrants excluded, and 803,360780,602 and 301,700789,289 restricted stock units excluded, respectively.

Concentration of Credit Risk

The Company maintains its cash with a major financial institution located in the United States of America which it believes to be credit worthy. Balances are insured by the Federal Deposit Insurance Corporation up to $250,000. At times, the Company maintains balances in excess of the federally insured limits.

Other Concentrations

The Company has historically relied on a single insurance broker and one to two underwriters at any given time to provide all automobile insurance on vehicles rentals on the HyreCar platform. There are multiple brokers and carriers who issue this type of insurance coverage, and the Company is regularly reviewing leading insurers in the transportation and mobility sectors as this is an important part of our operations. The Company does not believe the loss of our current broker or underwriters would have a material effect on our operations.

New Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), specifying the accounting for leases, which supersedes the leases requirements in Topic 840, Leases. The objective of Topic 842 is to establish the principles that lessees and lessors shall apply to report useful information to users of consolidated financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors' accounting is largely unchanged from the previous accounting standard. In addition, Topic 842 expands the disclosure requirements of lease arrangements. Lessees and lessors will use a modified retrospective transition approach, which includes severalseveral practical expedients. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021 for emerging growth companies, with early adoption permitted. The Company has reviewed and adopted the provisions of the new standard but it isstarting notJanuary 1, 2022. The standard will require all lease to be reported on a company's balance sheets as assets and liabilities. See Other section of Note 3 expected to have a significant impact on- Commitments and Contingencies for breakdown of lease Liability for the Company.term of the lease.

HYRECAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions in existing guidance and improves consistency in application by clarifying and amending existing guidance. This guidance is effective for annual periods beginning after December 15, 2021, and interim periods within those annual periods, where the transition method varies depending upon the specific amendment. Early adoption is permitted, including adoption in any interim period. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period, and all amendments must be adopted in the same period. The Company has reviewed the provisions of the new standard, but it is not expected to have a significant impact on the Company.

HYRECAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The FASB issues ASUs to amend the authoritative literature in ASC. There have been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our consolidated financial statements.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

Settlement and Legal

On August 27, 2021, a putative securities class action complaint captioned Baron v. HyreCar Inc.Hyrecar Inc. et al.al., Case No. 21-cv-06918, was filed in the United States District Court for the Central District of California against the Company; its Chief Executive Officer, Joseph Furnari; and its former Chief Financial Officer, Robert Scott Brogi. This action asserts claims and seeks damages for alleged violations of sections 10(b) and 20(a) of securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The proposedalleged class period is May 14, 2021 to August 10, 2021, inclusive. Pursuant to the Private Securities Litigation Reform Act, on November 19, 2021, the Court appointed Turton Inc. to serve as Lead Plaintiff. Lead Plaintiff then filed an amended complaint (the “First Amended Complaint”). The complaint asserts claims and seeks damages forFirst Amended Complaint alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, alleging that the defendants made material misrepresentations or failed to disclose material facts that, (1)among other things, the Company had materially understated its expenses and insurance reserves; (2) the Company had failed to pay valid insurance claims incurred prior to the class period; (3) the Company had incurred significant expense transitioning its newreserves in coordination with a third-party insurance claims administratoradjuster which Lead Plaintiff alleged was conflicted. On December 27, 2021, the Company and processing claims incurred from prior periods; (4) the Companyindividual defendants moved to dismiss the First Amended Complaint, arguing that Lead Plaintiff failed to adequately plead that any of the Company’s public statements were materially false or misleading, or that defendants acted with scienter– meaning defendants either knew those statements were false or were deliberately reckless to their truth or falsity at the time they were made. On February 16, 2022, the Court (Hon. Percy Anderson) granted defendants’ motion to dismiss on the basis that Lead Plaintiff failed to adequately plead any of defendants’ statements were materially false or misleading. Because the Court ruled that Lead Plaintiff did not appropriately price risk insufficiently plead falsity, the Court did not address the additional arguments regarding scienter at the time. The Court permitted Lead Plaintiff leave to amend its insurance productscomplaint. Plaintiff filed its Second Amended Complaint on March 21, 2022. The Second Amended Complaint asserts the same violations of the Exchange Act and was experiencing elevated claims incidence as a result; (Rule 10b-5,) again alleging, among other things, HyreCar made materially false or misleading statements related to its first quarter 2021 reserves, and by extension misstated expenses and revenues. On April 4, 2022, the Company reformed its claims underwriting, policies and procedures in responseindividual defendants moved to high claims severity and customer complaints; and (6) as a result,dismiss the Company’s operations and prospects were misrepresented.  PursuantSecond Amended Complaint on the basis that Plaintiff failed to plead sufficient facts that would cure the Private Securities Litigation Reform Act, the deadline for lead plaintiff applications was October 26, 2021, and on that day, four applications for appointment of lead plaintiff and lead plaintiff’s counsel were filed, with the motions set for hearing on November 29, 2021. As provideddeficiencies identified in the Court’s order on the parties’ scheduling stipulation, first motion to dismiss—i.e., that Plaintiff again failed to plead that any statements were materially false or misleading when made—and Plaintiff failed to plead that defendants acted with scienter. On April 21, 2022, the selected lead plaintiff must filecase was transferred to a consolidated or amended complaint, or notify new judge, and on April 27, 2022, the courtCourt issued a Reassignment Order that, it intends to rely onamong other things, vacated all hearing dates. The Company will re-notice the current complaint, within 14 days of entry of an order appointing lead plaintiff and lead plaintiff’s counsel, and defendants then have 21 days to movehearing for its motion to dismiss or otherwise respond to the operative complaint.Second Amended Complaint and expects it will be heard on August 25,2022. The Company believes that the allegations in this lawsuit are without merit and will continue to vigorously defend against them. The Company’s chances of success on the merits are still uncertain and any possible loss or range of loss cannot be reasonably estimated.

We connect drivers and vehicle owners in many tax jurisdictions throughout the United States. After the Supreme Court of the United States decision in South Dakota v. Wayfair Inc. (Wayfair) in June 2018, states commenced enacting laws that would require certain online sellers to collect sales and use tax despite not having a physical presence in the buyer’s state. In response to Wayfair, or otherwise, states or local governments may adopt, or begin to enforce, laws requiring us to calculate, collect, and remit taxes on sales in their jurisdictions. A successful assertion by one or more states requiring us to collect taxes could result in tax liabilities, including taxes on past sales, as well as penalties and interest. Based on our analysis of certain state regulations on peer-to-peer activities, we do not believe risk of loss is probable on historical revenue activities. We continuously monitor state regulations as it relates to peer-to-peer vehicle rental activities and will implement required collection and remittance procedures if and when we believe we would become subject to such regulations.

HYRECAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 4 – DEBT AND LIABILITIES

Accrued Liabilities

A summary of accrued liabilities as of September 30, 2021March 31, 2022 and December 31, 20202021 is as follows: 

As of September 30, 2021, March 31, 2022, the accrued payables amounted to $2,164,013,$ 1,129,393, which consists of additional investments accrued forincurred but thirdnot party support for strategic initiatives.invoiced business expenditures including legal fees, professional services and other operational expenditures. As of September 30, 2021March 31, 2022, the payroll tax liabilities amounted to $1,032,181,$301,502, which consists of the employer and employees share of the payroll tax liabilities related to stock options exercised and vested restricted stock units.

Notes Payable

On April 13, 2020, the Company entered into a loan with JPMorgan Chase Bank, N.A. as the lender (“Lender”) in an aggregate principal amount of $2,004,175 pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “PPP Loan”). The PPP Loan is evidenced by a promissory note (“Note”). Subject to the terms of the Note, the PPP Loan bears interest at a fixed rate of one percent (1%) per annum, with the firstsix months of interest deferred, has an initial term of two years, and is unsecured and guaranteed by the Small Business Administration (“SBA”). The Note provides for customary events of default including, among other things, cross-defaults on any other loan with the Lender. The PPP Loan may be accelerated upon the occurrence of an event of default.

As of September 30, 2021, the amount payable under the Note is $1,999,175. The PPP Loan proceeds were used for payroll, covered rent and other covered payments. The Company submitted to the Lender the PPP Loan forgiveness application as of July 2, 2021. On October 28, 2021, the full amount of the PPP Loan was forgiven by the SBA.

NOTE 5 – STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, $0.00001 par value per share.

Stock Options

In 2016, the Board of Directors adopted the HyreCar Inc. 2016 Incentive Plan (the “2016 Plan”). The 2016 Plan provides for the grant of equity awards to qualified personnel, including stock options, restricted stock, stock appreciation rights, and restricted stock units to purchase shares of common stock. The 2016 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board of Directors. The Company does not currently utilize the 2016 Plan for equity award grants.

In 2018, the Board of Directors adopted the HyreCar Inc. 2018 Incentive Plan (the “2018 Plan”). The 2018 Plan provides for the grant of equity awards to acquire shares of common stock. Three million shares of common stock were initially reserved for issuance under the 2018 Plan, with the share reserve number subject to increases that occur starting in 2021. The 2018 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board.

In the second quarter of 2021, the Board of Directors adopted the HyreCar Inc. 2021 Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the grant of equity awards to acquire shares of common stock. Three million shares of common stock were initially reserved for issuance under the 2021 Plan, with the share reserve number subject to increases that occur starting in 2024. The 2021 Plan is administered by the Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board. As of September 30, 2021March 31, 2022, the Company has not utilized the 2021 Plan for any equity award grants.

NaN stock options were granted during the ninethree months ended September 30, 2021March 31, 2022 and September 30, 20202021. Stock-based compensation expense for the vesting of stock options for the three months ended September 30, 2021March 31, 2022 and 20202021 was $632 and $24,277, respectively, and $11,402 and $302,510 for the nine months ended September 30, 2021 and 2020, respectively.immaterial. As of September 30, 2021March 31, 2022, there is 0no remaining stock-based compensation expense as all options are fully vested.

HYRECAR INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Stock Units and Shares Issued for Services 

A summary of activity with our restricted stock units (“RSUs”) for the ninethree months ended September 30, 2021 March 31, 2022is as follows:

Stock-based compensation related to RSUsrestricted stock units for the three months ended September 30, 2021March 31, 2022 and 20202021 was $1,027,767$1,135,088 and $99,303, respectively. Stock-based compensation related to RSUs for the nine months ended September 30, 2021 and 2020 was $6,728,560 and $384,200,$3,761,027, respectively. As of September 30, 2021March 31, 2022, unrecognized compensation expense related to the unvested RSUsrestricted stock units is $7,816,855$6,317,637 and is expected to be recognized over approximately 2.72.9 years.

During the ninethree months ended September 30, 2021March 31, 2022, the Company granted 12,27813,000 shares of common stock in exchange for legal services.as part of an employee severance agreement. The Company recognized stock-based compensation of $249,980$44,200 based on the closing price of the Company’s common stock on the date of grant.

Warrants

During the nine months ended September 30, 2021, several warrant holders exercised an aggregate of 309,252 warrants exercised in cashless exercises resulting in 121,111 shares of common stock being issued.

NOTE 6 – RELATED PARTY TRANSACTIONS 

Insurance

The president of the Company’s former primary insurance broker through June 2020 is also a minority Company stockholder and holder of warrants. As of September 30, 2021March 31, 2022 and December 31, 20202021, the Company had 0no outstanding balances to the broker included in accounts payable or accrued liabilities, respectively. During the ninethree months ended September 30, 2021March 31, 2022 and 20202021, the Company paid the broker approximately $0 and $2,580,136,$0, respectively. On June 15, 2020, the Company completed moving its primary and excess automobile insurance liability programs over to a new insurance broker and is no longer using the related party broker.

NOTE 7 – SUBSEQUENT EVENTS

On October 28, 2021, Nothe PPP Loan was forgiven by the SBA in the full amount of $1,999,175. Further on November 4, 2021, the Company expanded its partnership with Cogent and AmeriDrive to help drive additional car supply to the Company’s platform. As part material subsequent events have been identified as of the agreement, the Company agreed to increase the collateral held by Cogent bank by $1,500,000 (now $3,000,000 in total) in exchange for a credit line increase to expand AmeriDrive's vehicle fleet contributed exclusively to the Company platform. date of this filing.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended December 31, 20202021 included in our most recent Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss certain factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q.10-Q, particularly in the sections entitled “Risk Factors” and “Note About Forward-Looking Statements.”

Our Company

We operate in the car sharing marketplace for ride sharing through our proprietary marketplace platform. The Company has established a leading presence in Transportation-as-a-Service (“TaaS”) through vehicle owners and institutions, such as franchise car dealerships, independent car dealerships and rental car companies, who have been disrupted by automotive asset sharing. We are based in Los Angeles, California and car owners and drivers currently use the platform nationwide. Our unique revenue opportunity for both owners and drivers are providing a safe, secure, and reliable marketplace. We categorize our operations into one reportable business segment: Rental, consisting primarily of our vehicle rental operations in the United States.

Business and Trends

We generate revenue by taking a fee out of each rental processed on our platform. Each rental transaction represents a ride-sharing service driver (each, a “Driver”) renting a car from a participating car owner (each, an “Owner”). Drivers pay a daily rental rate set by the Owner, plus a 10%-20% HyreCar Driver fee and direct daily insurance costs. Owners receive their daily rental rate minus a 15%-30% HyreCar Owner fee. For example, as of September 30, 2021,March 31, 2022, the average daily rental rate of a HyreCar vehicle nationally is approximately $38 (“Daily Rental Rate”), plus a 10%-30%-20% HyreCar Driver fee ($6) and daily direct insurance fee of $15 on average, totaling $59 in total daily gross billings in paid by the Driver via a payment card transaction. On average approximately 78%77% of the daily rental is transferred to the Owner via our merchant processing partner. HyreCar earns revenue from the revenue share fees and insurance totaling approximately $29$30 per day. Accordingly, the GAAP reportable revenue recognized by HyreCar is $29$30 in this example transaction as detailed in the following table:

During the quarter ended September 30, 2021,March 31, 2022, the Company monitored the market's competitive prices to maintain good performance levels. The dynamic pricing of the daily gross and net rental rates were adjusted depending on the variations in demand and competition. The daily average gross rental rate for the three months ended September 30, 2021March 31, 2022 was $59, an increase of $6 or 11.3%12% from the $53 daily average gross rental rate recognized during the three months ended September 30, 2020.March 31, 2021.

Gross billings is an important measure by which we evaluate and manage our business. We define gross billings as the amount billed to Drivers, without any adjustments for amounts paid to Owners or refunds. It is important to note that gross billing is a non-GAAP measure and as such, is not recorded in our consolidated financial statements as revenue. However, we use gross billings to assess our business growth, scale of operations and our ability to generate gross billings is strongly correlated to our ability to generate revenue. Gross billings may also be used to calculate net revenue margin, defined as the company's GAAP reportable revenue over gross billings. Using the definition of net revenue margin and the example above, HyreCar's net revenue margin is equal to approximately 48%51% ($26,158,0009,550,592 HyreCar's GAAP revenue over $54,471,000$18,835,166 Total Gross Billings) for the ninethree months ended September 30, 2021.March 31, 2022. A breakout of revenue components is provided in the section of this Quarterly Report on Form 10-Q titled “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the footnotesnotes to the consolidated financial statements.

Non-GAAP Financial Measures

Gross Billings

We define gross billings as the amount billed to Drivers, without any adjustments for amounts paid to Owners or refunds. Gross billings include transactions from both our revenues recorded on a net and a gross basis. It is important to note that gross billing is a non-GAAP measure and as such, is not recorded in our consolidated financial statements as revenue. However, we useManagement believes gross billings provides useful information to investors and others in understanding our ability to generate revenue since our ability to generate gross billings is correlated to our ability to generate revenue. In addition, management uses gross billings to assess our business growth scale of operations and our ability to generate gross billings is strongly correlated to our ability to generate revenue.scale operations. Gross billings may also be used to calculate net revenue margin, defined as the Company's GAAP reportable revenue over gross billings.

The following table providespresentation of the non-GAAP financial measures is not intended to be considered in isolation, or as a reconciliation of our GAAP reported revenuesubstitute for, or superior to, gross billings for the threefinancial information prepared and nine months ended September 30, 2021 and 2020: presented in accordance with GAAP.

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance and the operating leverage in our business.business, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance.We believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team. Because Adjusted EBITDA facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes. We expect Adjusted EBITDA will increase over the long term as we continue to scale our business and achieve greater efficiencies in our operating expenses.

We calculate Adjusted EBITDA as net loss, adjusted to exclude:

For more information regarding the limitations of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA, see the section titled “Reconciliation of Non-GAAP Financial Measures.”

Reconciliation of Non-GAAP Financial Measures

We use Adjusted EBITDA in conjunction with GAAP measures as part of our overall assessment of our performance, including the preparation of our annual operating budget and quarterly forecasts, to evaluate the effectiveness of our business strategies, and to communicate with our Board of Directors concerning our financial performance. Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Furthermore, these measures have certain limitations in that they do not include the impact of certain expenses that are reflected in our consolidated statements of operations that are necessary to run our business. Thus, our Adjusted EBITDA should be considered in addition to, not as substitutes for, or in isolation from, measures prepared in accordance with GAAP.

We compensate for these limitations by providing a reconciliation of Adjusted EBITDA to the related GAAP financial measures, revenue and net loss, respectively.loss. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view Adjusted EBITDA in conjunction with their respective related GAAP financial measures.

Reconciliation of Non-GAAP Financial Measures

The following table provides a reconciliation of our GAAP reported revenue to gross billings for the three months ended March 31, 2022 and 2021: 

The following table provides a reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2021March 31, 2022 and 2020:2021:

Our operating results are subject to variability due to seasonality, macroeconomic conditions such as the effects of the COVID-19 pandemic and other factors. Car rental volumes tend to be associated with travel and driving holidays, where there is an influx of Uber and Lyft demand. Thus far in 2021,2022, we have continued to operate in an uncertain and uneven economic environment marked by heightened economic and geopolitical risks due to the COVID-19 pandemic.

Our objective is to focus on strategically accelerating our growth, strengthening our position as a leading provider of vehicle rental services to ridesharing (Lyft and Uber) and delivery (Door Dash, Instacart, Postmates) drivers, continuing to enhance our customers' rental experience, and controlling costs and driving efficiency throughout the organization. We operate in a high growth industry and we expect to continue to face challenges and risks. We seek to mitigate our exposure to risks in numerous ways, including delivering upon our core strategic initiatives, continued growth of fleet levels to match changes in demand for vehicle rentals, and appropriate investments in technology.

Significant changes in our results of operations for the three months ended September 30, 2021March 31, 2022 include:

Management's Plan 

We have incurred operating losses since Inception and historically relied on debt and equity financing for working capital. Going forward, the Company intends to fund its operations through increased revenue from operations and the funds raised through sales of its securities. We completed an underwritten public equity offering on February 9, 2021, consisting of an aggregate of 2,530,000 million shares of our common stock at a public offering price of $11.75 per share, which included the exercise in full of the underwriters’ option. This provided approximately $29.7 million in gross proceeds to the Company, before underwriting expenses and other costs.

With approximately 329,000314,000 quarterly rental days in the thirdfirst quarter of 2021,2022, our annualized rental day run rate has reached over 1,300,000is close to 1.3M per year. Our business model and platform allow us to potentially leverage new opportunities and create a larger market with ridesharing, food and package delivery services. Two thirds of the Drivers on our platform are now predominantly delivery oriented and the opportunity is accelerating in the local delivery as a service environment. We continue to expect revenue growth in 2021during the remainder of 2022 and beyond as we continue to focus on increasing our car supply to meet the driver demand and other promotional efforts related to our car sharing marketplace platform.

As part of our focus to increase car supply, the Company's strategic partnership with AmeriDrive Holdings is intended to create a national network of vehicle supply and fleet maintenance operations and is expanding our operations in the Southeast United States. On February 10, 2021, TrueCar announced a partnership with HyreCar to provide its car sharing marketplace with a modern digital car buying and trade-in solution. The TrueCar partnership offers a potential way to address the automobile trade-in market in a relevant and effective manner for dealers and customers. TrueCar helps create awareness that vehicle dealers can benefit from serving the TaaS industry via the Company's platform. We believe both the AmeriDrive and TrueCar relationships enhance our ability to increase revenue.

Based on the capital currently on hand, as well as increasing revenue levels through the normal course of business, we believe the Company has sufficient resources to continue to operate its business forThroughout the next 12 months, although the Company intends to fund its operations through revenue from timeoperations, current cash reserves and through equity/debt financial instruments including the available ATM Agreement. The estimated cash flows combined with opportunities to time explores meansaccess capital lead us to raise additional capital.believe the Company will have sufficient resources to operate its business. The current top 10 U.S. state markets in our geographic footprint, and our volumes of quarterly rental days and net revenue from the quarters ended September 30, 2019March 31, 2020 through September 30, 2021,March 31, 2022, is detailed below.

Components of Our Results of Operations 

The following describes the various components that make up our results of operations, discussed below: 

Revenue is earned from fees associated with matching Owners of cars that meet the strict requirements imposed by ride-sharing services such as Uber and Lyft with Drivers. A Driver will typically rent a car through one transaction via our on-line marketplace. We recognize GAAP reportable revenue primarily from a transaction fee and an insurance fee when a car is rented on our platform when the Company, 1) identifies the contract with the customer, 2) identifies the performance obligations in the contract, 3) determines the transaction price, 4) determines if an allocation of that transaction price is required to the performance obligations in the contract, and 5) recognizes revenue when or as the Company satisfies a performance obligation. 

Cost of revenue primarily include direct fees paid for driver insurance, insurance claim payments based on the policy in effect at the time of loss, merchant processing fees, technology and hosting costs, and motor vehicle record fees incurred for paid driver applications. 

General and administrative costs include all corporate and administrative functions that support our business. These costs also include payroll for officers and operational staff, stock-based compensation expense, consulting costs, professional fees, and other costs that are not included in cost of revenue. Research and development costs are related to activities such as user experience and user interface development, database development and maintenance, and technology related expenses to research, improve, implement, or maintain technology and systems utilized throughout our enterprise. Research and development costs are expensed as incurred. Sales and marketing expenses primarily consist of personnel-related compensation costs, commissions expenses, advertising expenses, and marketing partnerships with third parties. Sales and marketing costs are expensed as incurred.

Other income/expense includes non-operating income and expenses including interest income and expense. 

Results of Operations

Three Months Ended September 30, 2021March 31, 2022 compared to Three Months Ended September 30, 2020March 31, 2021

Revenue and Gross Profit. Revenue totaled $9.7$9.6 million for the three months ended September 30, 2021,March 31, 2022, an increase of $2.9$2.2 million or 42.6%28.2% over the $6.8$7.4 million of revenue recognized during the three months ended September 30, 2020.March 31, 2021. Rental days totaled approximately 329,000,314,000, an increase of 56,00014,000 rental days or 20.5%4.7% compared to the prior year period. The daily average net rental rate for the three months ended September 30, 2021March 31, 2022 was $29,$30, an increase of $5$6 or 20.7%24% from $24$24 daily average net rental rate recognized during the three months ended September 30, 2020.March 31, 2021. Gross profit totaled $3.0$2.9 million for the three months ended September 30, 2021,March 31, 2022, a modest increase of $0.1$0.2 million or 3.4%7% over the $2.9$2.7 million gross profit recognized during the three months ended September 30, 2020. Gross profit margin increased to 30.7% for the three months ended September 30,March 31, 2021 from 24.2% normalized for one-off and prior period claims (8.9% actual) for the three months ended June 30, 2021. . The increase in gross profit margin was primarily as result of claims process improvements and dynamic pricing. Overall, the increase in revenue and gross profit were primarily attributed to favorable pricing and higher net rental rate and days partially offset by an increasehigher insurance and claims-related costs. Gross profit margin was seasonally slightly lower at 31% for the three months ended March 31, 2022 compared to 34% in insurance premiums, claims and merchant fees.Q4 of 2021 up from a normalized 24% in Q2 of 2021. This decrease was attributed to due to more frequent losses during winter months. 

Operating Expenses. Operating expenses, consisting of general and administrative, sales and marketing, and research and development expenses totaled $9.1$8.3 million for the three months ended September 30, 2021,March 31, 2022, an increasedecrease of $4.4$1.7 million or 93.6%17% over $4.7$9.9 million in such expenses recognized during the three months ended September 30, 2020. The additional operating expenses were incurred to enable and support growth and scale the Company across its functional areas. These expenses included costs incurred for the enhancement of the Company's technology platform, efforts at stimulating demand through marketing, as well as scaling our customer support/sales organization.March 31, 2021. General and administrative expenses totaled $4.7$4.5 million for the three months ended September 30, 2021,March 31, 2022, an increasedecrease of $2.6$1.2 million or 123.8%20% over $2.1$5.7 million recognized during the three months ended September 30, 2020. Additional expenditures were primarily geared towards customer supportMarch 31, 2021, achieved through a focused reduction of non-growth related expenses and centralized operations supporting the platform, third party support for strategic initiatives, recruitment costs, non-cashdecreased stock-based compensation expense of equity grants and general and administrative functions to scale and overall business insurance.compensation. Sales and marketing expenses totaled $2.5$2.2 million for the three months ended September 30, 2021,March 31, 2022, an increasedecrease of $0.7$0.5 million or 38.9%18% over $1.8$2.7 million of sales and marketing expenses recognized during the three months ended September 30, 2020. The increase was primarily attributedMarch 31, 2021, thanks to an increaseefficiency gains in digital advertising andboth sales personnel.headcount as well as more targeted marketing spend. Research and development expenses totaled $2.0$1.5 million for the three months ended September 30, 2021, an increase of $1.2 million or 150.0% over $0.8March 31, 2022, compared to $1.5 million of research and development expenses recognized during the three months ended September 30, 2020. The increase was primarily attributed to growthMarch 31, 2021, a stable result highlighting: increased efficiency in technology infrastructure support related to the enhancementautomation of recurring spend and maintenance of our digital marketplace technologydecrease in stock-based compensation, offset with re-invested spend into platform optimization, new features and the hiring of external consultants to supplement and speed up these efforts.scaling.